RVs offer incredible freedom and adventure, allowing people to embark on cross-country road trips and make unforgettable memories. Unfortunately, an RV can be expensive, putting a damper on dreams of RV travel and living. A camper can cost anything between $10,000 and $400,000.
Financing strategies can facilitate the purchase of an RV. In this guide, we’ll go over how you can use a personal loan for an RV, as well as the pros and cons of popular RV financing methods.
Understanding the RV lifestyle
Many types of recreational vehicles (RVs) exist, such as campers, motorhomes, and trailers. In recent years, RV travel has surged in popularity due to its benefits and versatility. The main appeal of RVs includes providing people with:
- Freedom of travel and camping
- Convenient home away from home
- Portable office space
- Lower costs compared to a house
- Connection with nature
- Adaptability to change
- Wide variety of RV options
- Ability to custom build an RV
Whether you want to live on the road in the long run or go on vacation with your family and friends, an RV can be an excellent option and a path leading to many exciting opportunities.
Traditional RV financing options
Other than obtaining personal loan funds, you can also consider using other financing options. Here are several common strategies that could prove beneficial depending on your needs.
RV loans from banks and credit unions
If you want an RV-specific loan, you might be able to procure one from a bank or credit union. This can be particularly beneficial if you have an existing good relationship with the financial institution since you may be able to obtain better terms and rates.
Some dealerships offer financing plans for RVs. These plans are convenient and let you quickly obtain financing right when you are shopping at the dealership. However, this convenience may cost you more money in the long run since many dealership financing plans have strict repayment terms or high interest rates.
Home equity loan
If you have your heart set on becoming an RV traveler in the long term, you might benefit from a home equity loan. A home equity loan allows property owners to borrow against the equity in their homes.
Home equity loans can be easier to obtain than regular loans if you have poor credit. However, defaulting on a home equity loan can result in foreclosure, which means losing your property. This high level of risk makes home equity loans more of a last resort than personal loans.
A deep dive into personal loans for RV purchases
A personal loan is a financing method in which you apply for a desired loan amount. Prospective lenders will evaluate your application. If it’s accepted, the funds will be directly disbursed into your bank account. Over the lifespan of the loan, you will be expected to repay the principal loan plus interest.
Here are the main advantages of using a personal loan for an RV purchase.
No restrictions on the RV type
Personal loans are incredibly flexible. You can use the funds for a wide variety of purposes with few exceptions, which means you can choose whatever RV you prefer. You can freely opt for whichever type or model of RV you want, along with any RV accessories and premiums you might want.
No down payment
In most cases of personal loans, you will not need to make any down payment. This means you can avoid significant upfront costs when purchasing your chosen RV.
Personal loans are relatively convenient and accessible, with funding available soon after loan approval. If you’re looking for speedy funding, there are even same-day personal loans. Be sure to carefully review loan terms so that you don’t accidentally get into an unfavorable financial position for same-day personal loans.
Competitive interest rates
Compared to other financing methods such as credit cards, you can obtain lower interest rates, especially if you have a good to excellent credit score. This can help you save money in the long term as you repay the debt. However, be aware that if you have poor credit, it can be challenging to find a loan with favorable terms since loans for RVs typically require significant loan amounts.
Common criteria lenders consider when making loan decisions
Knowing the key criteria lenders take into account when looking at loan applications can help you increase your chances of loan approval. Here are the commonly considered factors that affect loan decisions:
- Credit score of the applicant
- Income stability
- Employment type
- Existing debt obligations and debt-to-income (DTI) ratio
- Recent credit behavior
- Credit history length
- Credit utilization ratio
Loan approval chances are usually deeply entwined with creditworthiness and financial stability. If you can improve your credit score before applying for a personal loan, you can potentially obtain more favorable loan terms.
Advantages of using personal loans to acquire an RV
Convenient loan approval process
The loan application and approval process is relatively simple and accessible, with both online and in-person options offered by many loan providers. To further hasten the loan application process, make sure you have on hand relevant documentation and details, such as your income, identification, and loan purpose.
Fast access to funds
After your personal loan has been approved, loan funds are often disbursed within a few days. Funding can even be immediate if you choose an appropriate lender known for speedy funding or expedited funding options.
Flexible RV purchase
Being able to use your personal loan funds for whatever RV model or make you want is a notable advantage. Whether you want a campervan or a motorhome, a personal loan offers you the flexibility of choice. Unlike other financing plans from dealerships, you won’t be locked to specific RVs.
Plus, you can buy the RV accessories you want or need to enhance your RV lifestyle. For example, you can purchase a GPS or adapter without worrying about needing an additional financing plan.
Favorable loan terms
With so many personal loan providers available, you can shop around for loan terms that align with your RV needs the best. When comparing loans, consider various details, such as:
- The interest rate
- Fees and penalties
- Credit impact
- Lender reputation
No need for collateral
Personal loans are generally unsecured loans, which means that you won’t need to offer any of your valuable assets as collateral. This can be advantageous since you reduce the risk you take on when you obtain the loan. Since you’re planning to travel by RV, you might encounter unexpected expenses on the road that change your financial situation. Not risking the repossession of collateral assets can be helpful.
Key points to reflect on before opting for a personal loan for an RV
Before purchasing your RV with a personal loan, make sure that you clearly understand the potential benefits and drawbacks of opting for a personal loan. Here are some of the main points to consider before you use a loan to buy an RV.
Total borrowing cost
It’s vital that you know the total cost of borrowing before signing a personal loan agreement. The main borrowing cost is generally the interest, but there can also be various underwriting and late fees.
To get a clearer idea of the total cost over the loan term, assess the various components of the loan, such as:
- Loan tenure: A longer loan term means more interest can accrue, but you will get more time to gather repayment funds.
- Interest rate: A high interest rate directly increases the total cost of the loan. If you have good credit, it is easier to find or negotiate a loan with favorable terms and lower interest rates.
- Prepayment penalty: If you might repay the loan early, it’s good to know that some lenders charge a prepayment penalty.
- Origination fee: Although fees for sending in a loan application are not as popular these days, lenders may charge you a flat or percentage fee after you apply for a personal loan.
Long term implications
It might not be in your best interest to take out a personal loan and debt burden if you’re hitting the road in an RV. Carefully consider the fact that you will need to pay monthly debt installments until the personal loan is completely repaid.
Compare multiple loan offers
It’s a good idea to compare different loan offers so that you can obtain the best deal for a personal loan. Finding a loan with suitable loan terms and requirements can help you make the most out of the funds and mitigate the effects of a loan on your financial standing.
When you apply for a personal loan officially, lenders will perform hard inquiries that can drop your credit scores by around 5 points each time. If many lenders pull your credit in a short amount of time, you might garner more noticeable credit score damage.
One way to avoid losing credit with less suitable lenders is to pre-qualify for loans before you submit loan applications. Pre-qualification allows you to sift through available lenders to find the ones more likely to approve your application.
The depreciation of RVs
RVs will depreciate in value over time. To make an informed borrowing and purchasing decision, familiarize yourself with the market prices and depreciation rates of RVs. Otherwise, you might find the high loan amount and total borrowing cost no longer matching the value of the RV.
Alternatives for financing an RV
If you would prefer other methods for obtaining an RV, here are a few of the most popular alternative strategies.
RV rental platforms
If you don’t mind renting an RV instead of buying, at least temporarily, you might benefit from an RV rental platform. This also allows you to try out a particular RV and evaluate how you enjoy the RV life before you commit to an expensive purchase.
Peer-to-peer lending platforms
Another borrowing option involves checking out peer-to-peer (P2P) lending. On P2P online platforms, you can search for individuals who are willing to lend money. This can be an attractive option to those who dislike interacting with typical loan providers like banks and financial institutions.
Manufacturer promotions and discounts
Sometimes, it can be cheaper to buy directly from the RV manufacturer. There may be active deals and discounts. However, most leading RV manufacturers do not sell directly to consumers, making it possibly a hassle. It may be easier to leverage dealership promotions and financing plans than to find a suitable sale from a manufacturer.
Still, if you’re looking to custom-build an RV, it might be worth it to buy directly from the manufacturer for the increased flexibility and premium experience.
Memberships and organizations
Some clubs and organizations offer RV financing deals as a perk of membership. If you’re a part of an RV campground membership, club, or group, keep an eye out for special RV deals and opportunities.
Another way to finance a large purchase is to use your credit cards. However, be wary of higher interest rates and stricter repayment terms, which can pose an issue when RVs cost thousands of dollars. Failing to repay credit card debt can result in negative financial and credit impact.
Owning an RV is a dream for many individuals and families. It enables a new kind of lifestyle on the road, full of freedom and adventure. With a personal loan, you can:
- Buy the RV model and type you want
- Add any RV accessories on the side
- Pay for RV insurance
- Set out on an adventure with your shiny new RV
Of course, it’s prudent to assess your financial stability and research all financing avenues before you commit to a personal loan. Choose the option that aligns best with your goals and circumstances.
Resources and further reading
Since the cost of an RV can vary greatly depending on what model you’re considering, make sure you find a trustworthy and reliable personal loan provider. Here are a few lenders potentially suitable for granting loans for large purchases.
Personal Loans Company Reviews
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